7 – Gold and Silver

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What you should know about gold and silver…

I get asked about this all the time.
Again, I don’t have a crystal ball but it really is kind of easy to figure out.  Let me walk you through it.
Gold has become a “FEAR” barometer rather than a true investment, in my opinion and the opinion of MANY economic experts. It has started to “decouple” from its old position as a strict measure of the dollar. ie: The dollar goes down in value, gold goes up.  Instead, what we see are “fear moves”.  Have a “crisis” gold goes up. Things look better, market rises, all is calm, gold goes down.  Have an uprising in a country, gold goes up.  Got it?

Do NOT buy gold out of FEAR…
If you are afraid or have concerns then MAKE PLANS.

There are three main reasons people buy gold or silver.
Reason #1… You want to protect your money from inflation and the drop of the dollar.
Reason #2… People think they can MAKE MONEY buy doing this.
Reason #3… You think if the world goes to HELL, you can use gold or silver as payment.

I guess all three can be justified but let’s look deeper.

Gold Stew Anyone?
This should help put it into perspective. ( A little graphic.)
“Joe” has $50,000 in bank account.
Joe is afraid, so he buys $50,000 worth of gold.
The world as we know it “falls apart”…………………………
People are looking for food, shelter, gas, tools, etc.
They break into Joe’s house.  They kill Joe, take his food, his gas cans, his water, his guns, and his generator.
They leave his bag of $50,000 worth of gold lying next to his dead body.
To them, now in a state of survival, gold means nothing to them.
You can’t make a “pot of gold stew”.
In the book One Second After
, you will see how this works.
Eventually things like bullets and food become the trading “gold”.
It’s all about need and perception.

So, that was the EXTREME scenario… lets tone it down a bit.

Let’s assume that society has not broken down, things are just not that great and you want to protect what you have.

If you have a “portfolio” to protect, then yes a percentage, not all, of it should probably be in gold.
(It should also have non-US currency and contain “short positions” (funds that go up when things go down) on the market and US Bonds.  ‘That wacky debt thing again.’)   If ALL goes SOUTH, you’ll be sitting pretty good, or at least not have lost it all.
Again, you do this with a PERCENTAGE of your portfolio.

What about the “average guy”
One of the worst commercials I have seen in a long time comes from a gold company. They show a waitress at a diner wondering if “gold is right for her?”. How stupid. NO DUMMY. gold is NOT right for you. If you’re working in a diner, just making your bills, then WHY ON EARTH would you consider buying gold. It is an effort to get more lower income people to buy gold by the company, so that they can make a profit. Horrible approach.
I own some gold MARKET FUNDS (ETF’s) for now, but only physically own silver which you can buy here> Silver American Eagles

Here is a photo of my OWN silver bullion coins.

They come in a plastic box with cap. The box holds 20 coins. I also bought several “junk grade” circulation coins.
These are not pure silver, but are OLD and good for trading and selling if needed.

 

I trust this company 100%. You buy your gold and silver a small percentage over spot price and they ship it to you within days. Note… I ship it to my PO Box, not my home, for security reasons.
Why physical silver?

Quick Summary…

  1. Silver is used in industry so it “goes away” quicker than gold.  It also tracks gold pretty closely in movement. However, lately it has outperformed gold.
  2. You need a tank of gas, you have a gold coin. It’s worth $1600. A sliver coin is worth $75. Which makes more sense?  Try going shopping for food with a $5000 gold bar.  What are you going to do, “cut off a piece”?
  3. Silver bullion coins or old silver currency coins are the best place for the average person to put some “reserve survival  money”.  If nothing goes wrong, and you want to sell them, you can do it on Ebay or at a local dealer.  Try getting a “safe bid” on a $4000 gold bar.
  4. Gold has extreme potential for manipulation on a world scale. Countries, banks and billionaires have been acquiring MASSIVE amounts over the past year. When they start to DUMP it. Watch out.

Now, let’s go back to BUBBLES for a minute.
Remember when people said real estate was the safest investment in the world? “Homes and land will ALWAYS go up in value, there is only so much land.” Wow, that was really a FIRM statement. I can’t tell you how many “real estate investors” I know are now filing for bankruptcy.  They got caught in the “bubble that couldn’t pop!”
The same applies for gold.  The FEAR has started to create a gold bubble. But that is OK as long as you know it is a bubble. Yes, I believe gold has the potential to hit numbers that I, as well as others,  are afraid to “call” for fear that we will be called idiots. I have seen some call for the high to hit between $3500 – $5000 an ounce.  Again, there is no crystal ball.  Like many investment experts say… “When will gold go down? The day after you buy it.”

So, buying gold is fine for the person that has a larger portfolio.
Not so smart for the “average person”.
That person should have SOME, physical silver on hand, not ALL their savings.
Remember the other problems with owning gold and silver “in hand”.
Security and how are you going to sell it?
It’s not a bright idea to put all your savings in GOLD and keep it in a safe in your house.  One BAD GUY breaking in and it’s all gone.
Next where and how do you sell it? Are you going to risk carrying a briefcase of gold around trying to unload it?

Again, CALM DOWN, think ahead and plan with forethought.

Most IMPORTANT point about buying GOLD I want to STRESS.
Some people are buying gold because they think the economy is going to COLLAPSE at some point in the near future. OK, so if the economy “collapses”, what else collapses? Pretty much EVERYTHING that is tied into the economy.  Housing, collapses. Stock markets, collapses. Price of cars, collapses. Job market, collapses.  Gold??? It really depends on how severe the collapse.  But… if you are assuming the TOTAL collapse, then yes, gold will as well. At some point gold, will have a bubble burst and everyone will be trying to sell it.
So, let’s try this again…
If you think the economy and the stock market are going to “COLLAPSE”, where would you put money to safeguard it?  What is the ONLY thing that is GUARANTEED shoot up with a crash of the stock market and our economy? It is what you read about in the stock market pages.  Short positions on the market that go up when the markets go down.
GET IT???
It is the ONLY thing that is guaranteed to go up.
So, for REAL safety, take a SMALL portion of your money and put it into fund shares that hold a SHORT position on the market. There are many, spread it around.

REMEMBER: If you’re going to BET AGAINST the economy, which is what you’re doing when you buy gold, then bet against the ENTIRE ECONOMY. NOT just one element of it. Buy funds that short the markets as a safe haven for the BIG CRASH, if that is your concern.

Now, when do buy them again???  You buy them when no one wants them. GET IT? You buy funds that are “short funds” when things are GOOD, not bad.  So, when the market feels “HAPPY” again, between 12,300 – 13,500 (DOW) that is when you start buying. Also, if this is “safety money” DON’T sell it just because it goes up little.  You hold for the “big one”.  If you want to shave off a “little profit” fine, but keep the base amount the same.

NOTE… I have created a separate “HOW TO” page if you want to open a trading account to buy ETF’s such as gold and silver, or short funds such as DXD. It is HERE

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